There are a number of criticisms emerging about the decision to cancel many of Thursday afternoon's trades. You can certainly see the thinking behind the cancellations: Something went wrong in the market, stocks fell far too far (in some cases, to a penny), and a do-over would set things right.
But David Merkel at the Aleph Blog points out that cancelling trades will simply take away any incentive investors have for stepping into a falling market in the hope of profiting from a rebound. He explains:
"NASDAQ should not have cancelled the trades. It ruins the incentives of market actors during a panic. Set your programs so that they don't do stupid things. Don't give them the idea that if they do something really stupid, there will be a do-over. In the absence of fraud, trades should not be cancelled."
Meanwhile, Felix Salmon at Reuters, likes the idea of taxing financial transactions in an attempt to slow things down a little: He explains:
"Historically, people have complained that such a tax harms liquidity, which is true. But the fact is that it harms the bad kind of liquidity - the liquidity which dries up to zero just when you need it most. Liquidity, if it's spread across multiple electronic exchanges and can disappear in a microsecond, does very little actual good, and in fact does harm during tail events like this. Let's tax it, and raise some money for the public fisc at the same time as slowing down markets and making them think before doing a trade."
David Berman